Citizens Property Insurance to reduce rates

Published: Monday, June 23, 2014 at 1:55 p.m.

Last Modified: Monday, June 23, 2014 at 5:02 p.m.

Citizens Property Insurance, Florida’s largest home insurer, is expected to reduce average rates in 2015 for the first time in years, although many Southwest Florida customers will still see an increase because some of the most common policies sold locally are still considered underpriced.

The statewide rate reduction proposed by Citizens’ staff is an important milestone for Florida’s troubled property insurance market, which has the highest rates in the nation. It could be a sign that the industry is finally approaching equilibrium after years of steady rate hikes.

A typical “multi-peril” homeowner’s policy would see a price cut of 6.3 percent on average statewide, while a multi-peril mobile home policy would drop by 5.1 percent if Citizens’ board approves the proposal Wednesday. The state Office of Insurance Regulation must also approve the plan.

But the average premium reduction across all policy types at Citizens would only be 1 percent because rate increases are still proposed in many counties for commercial properties, “wind only” hurricane coverage and condo policies.

Rates for many Sarasota County homeowners would still increase because the county has a high number of wind-only policies. Citizens officials consider these policies a bargain for the type of risk involved, despite repeated rate hikes and eight years without a hurricane hitting Florida.

Sarasota County had 47,785 Citizens policies as of December 2013 while Manatee County had 17,792 policies. About 57 percent of homeowners policies in Sarasota County — including condo and mobile home customers — are expected to see a rate decrease and 43 percent will see an increase, according to numbers provided by the company. Nearly 90 percent of the homeowners policies in Manatee County would see a decrease.

Throughout the state, roughly 70 percent of Citizens homeowners’ policies would drop in price and 30 percent would increase under the proposal.

The fact that most Citizens policies likely will be cheaper next year is a significant reversal from years of steady rate increases, and reflects an overall trend in the industry. Many of Florida’s private home insurers have cut rates over the past nine months, although the reductions tend to be modest.

Citizens spokesman Michael Peltier said the company is benefiting from trends that are buoying the entire industry, including cheaper reinsuance prices, a growth in cash reserves, the absence of hurricanes and cost-control efforts.

Prompted by state leaders, Citizens’ board moved aggressively in recent years to push more customers into the private market by hiking rates and reducing coverage at the state-run company, which was conceived as Florida’s insurer of last resort. The company expanded dramatically after large private insurers reduced their presence in the state following the devastating 2004 and 2005 hurricane seasons.

Citizens prices have increased every year since a rate freeze was lifted in 2009, but lawmakers resisted calls to remove the company’s 10 percent cap on annual rate hikes, known as the glide path.

“It’s clear the glide path is working as we come ever closer to adequate rates across the state,” Barry Gilway, Citizens president, CEO and executive director said in a statement. “The significant improvement in the financial strength of the private market means that competition for Citizens business will be even greater than it has been allowing us to continue the excellent progress we are making in providing opportunities for Citizens customers in the private market.”

Private insurers and many lawmakers have argued that Citizens’ rates were undercutting the private market and discouraging competition, but those concerns seem to be diminishing after years of rate increases. Critics of the insurance industry said such fears were always overblown, and that private companies rely too heavily on expensive reinsurance to hedge against hurricane risk instead of building cash reserves.

Sarasota insurance agent John Dauenheimer said Citizens’ rate reduction will come as welcome relief to many property owners.

“It’s good that it’s going down,” he said. “It’s been going up for years just politically.”

But Dauenheimer cautioned that not everyone will benefit and noted the state’s insurance market still has significant weak spots. Just this month another Florida-based property insurer, Sunshine State Insurance Company, was declared insolvent. Sunshine State is the 12th Florida insurer to fail in the last decade.

Asked if Florida’s property insurance market is on the upswing, Dauenheimer said: “People have to look at Sunshine State and ask themselves that question.”

EARLIER: Citizens Property Insurance, the state's largest home insurer, is expected to reduce average rates in 2015 for the first time in years, although many Sarasota County policyholders will still see an increase because most Citizens' customers in the area have high risk policies that only cover hurricane damage.

The statewide rate reduction proposed by Citizens' staff is an important milestone for Florida's troubled property insurance market, a sign that the industry is finally approaching equilibrium after years of steady rate hikes.

The proposed average statewide rate decrease for a typical “multi-peril” homeowner's policy is 6.3 percent, while a multi-peril mobile home policy would drop by 5.1 percent on average if Citizens' board approves the proposal Wednesday and the state Office of Insurance Regulations signs off on the plan.

But the average premium reduction across all policy types at state-run Citizens would only be one percent because rate increases are still proposed in many counties for commercial properties, “wind only” hurricane coverage and condo policies.

And because Sarasota County has a high number of wind only policies that only cover hurricane damage, rates for many Sarasota County homeowners would still increase. Citizens' officials still consider these policies underpriced for the type of risk involved, despite repeated rate hikes and eight years without a hurricane hitting Florida.

Sarasota County had 47,785 Citizens policies as of December 2013, while Manatee County had 17,792 policies. About 57 percent of homeowner's policies in Sarasota County – including condo and mobile home customers – are expected to see a rate decrease and 43 percent would see an increase according to numbers provided by the company. Nearly 90 percent of the homeowner's policies in Manatee County would see a decrease.

Throughout the state, roughly 70 percent of Citizens homeowner's policies would drop in price and 30 percent would increase under the proposal.

The fact that most Citizens policies likely will be cheaper next year is a significant reversal from years of steady rate increases, and reflects an overall trend in the industry. Many of Florida's private home insurers have cut rates over the last six months, although most of the reductions have been modest.

EARLIER: Citizens Property Insurance, the state's largest home insurer, is expected to reduce average rates in 2015 for the first time in years, but most Sarasota County policyholders likely will not see a benefit.

The rate reduction proposed by Citizens' staff is an important milestone for the state's troubled property insurance market, a sign that the industry is finally approaching equilibrium after years of steady rate hikes.

The proposed average statewide rate decrease for a typical “multi-peril” homeowner's policy is 6.3 percent, while a multi-peril mobile home policy would drop by 5.1 percent on average.

But the average premium reduction across all Citizens policy types would only be one percent because

rate increases are still proposed in many counties for commercial properties, “wind only” hurricane coverage and multi-peril condo policies.

And because Sarasota County has a high number of wind only policies that only cover hurricane damage, rates for most Sarasota County homeowners will increase. Citizens still considers these policies underpriced for the type of risk involved, despite repeated rate hikes and eight years without a hurricane hitting Florida.

Sarasota County had 47,785 Citizens policies as of December 2013, including 26,683 wind only policies. Manatee County had 17,792 Citizens policies, including 1,758 wind only policies.

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